House prices could drop by between 5-10% over this year and next, according to an NCB Stockbrokers' report.
NCB says that investors who have bought buy-to-let properties off the plans, that are not due for completion for the next 12 to 18 months, are the most vulnerable to a fall off in the market.
NCB economist Eunan King says rents are falling, and with up to 30% of new mortgages going to investors it is clear there may be a supply over-hang of this kind of property.
Prices may also be hit as lenders curb the increase in loan-to-value ratios. NCB estimates that in 15% of new mortgages, banks are lending purchasers over 90% of the value of their new homes.
Despite these setbacks NCB does not expect a house price collapse, and says the value of houses in the Dublin area are less likely to fall than elsewhere.
The report argues that with 1.3 million people aged between 15 and 34 years of age there will continue to be a strong demand for new homes. If added to by continued strong inward migration, 60,000 news home could be required each year between 2006 and 2011.
